Opinion
C.A. No. 19321 NC
Date Submitted: October 15, 2002
Date Decided: January 30, 2003
Stephen E. Herrmann, Raymond J. DiCamillo, and Becky A. Hartshorn, Esquires, of RICHARDS, LAYTON FINGER, P.A, Wilmington, Delaware; Attorneys for Plaintiffs.
Melvyn I. Monzack, Rachel B. Mersky, Edward M. Lilly, and Joseph R. Biden, III, Esquires, of WALSH MONZACK and MONACO, P.A., Wilmington, Delaware; Attorneys for Defendants.
MEMORANDUM OPINION
Pending is the defendant's motion for summary judgment in this action, which arises out of the termination of an easement between the parties' adjacent shopping centers. The defendant blocked the easement between the two properties, claiming that the easement had been validly terminated. Contending that the easement is still valid and in force, the plaintiff sued for a declaration to that effect, and for an injunction removing the obstacle blocking the easement's use. For the reasons discussed below, the motion for summary judgment will be granted in part and denied in part.
I. FACTS
The defendant, Alpha Trust ("Alpha"), is a general partnership that owns the Talleyville Shopping Center ("Talleyville") which is located at the intersection of Silverside Road and Route 202 in Wilmington, The plaintiff, Brandywine Development Group, L.L.C. ("Brandywine"), is a Delaware limited liability company that owns the Concord Square Shopping Center ("Concord Square"), which is adjacent to and abuts Talleyville?
Compl. ¶ 2, V. Answer ¶ 2.
Brandywine was formed through a merger and is the successor in interest to BC Development Associates, a Delaware general partnership that entered into the Declaration and Memorandum with Alpha.
V. Compl. ¶ 3, V. Answer ¶ 3.
On June 16, 1994, the parties entered into a Cross-Easement Declaration ("Declaration"), wherein they agreed that a portion of the Talleyville parking lot would be used as an easement affording access between Concord Square and Silverside Road. The easement was intended for the exclusive use of the employees and customers of the businesses located in both shopping centers, enabling them to avoid using Route 202 as the access road between the two shopping centers. Construction and service vehicles, however, were forbidden from using the easement under any circumstances.
V. Compl. ¶ 5, V. Answer ¶ 5, Stella Aff. ¶ 4.
Decl.¶ 6.
Id. at ¶ 7.
Paragraph 6 of the Declaration gave Alpha the right to terminate the easement on ninety days notice, under two conditions: (i) if a post office was not constructed at Concord Square before June 16, 1997, or (ii) if the easement posed a "material burden" to Talleyville. Alpha was contractually permitted to determine, in its sole discretion, whether a material burden existed; moreover, Alpha's determination would be binding and not subject to challenge for any reason.
Paragraph 6, in full text, states that:
In the event that a United States Post Office is not operational on the site at the proposed location within three (3) years from the date of execution of this Agreement, then Alpha reserves the right, upon ninety days (90) written notice, to terminate any and all rights of ingress and egress through its property to Silverside Road granted pursuant to this [Declaration]. Furthermore, if at any time Alpha determines that the easement granted to [Brandywine] is a material burden to its center, regardless of whether a post office is located on [Brandywine's] property, then Alpha shall have the right, at any time, upon ninety (90) days written notice, to terminate any and all rights of ingress and egress through its property to Silverside Road granted pursuant to this [Declaration]. Such determination, if made by Alpha, shall be absolute, binding and not subject to challenge for any reason whatsoever. The term "material burden" is intended, by way of illustration, to included matters such as increased tenant vacancies, increased insurance liability premiums or other costs associated with increased risk, lower rental rates, or increased tenant dissatisfaction at the Talleyville Shopping Center, which are substantial and relate, directly or indirectly, to the easement granted by Alpha to [Brandywine], or a proposed change of use of the Talleyville Shopping Center which proposed change is inhibited or impaired in any way by the existence of the subject easement. The above referenced examples are for purposes of illustration only and are not to be deemed all inclusive in determining whether in fact a "material burden" results from the easement granted to [Brandywine].
Id.
Contemporaneous with the Declaration, the parties executed an Interpretive Memorandum ("Memorandum"). Its purpose was to clarify certain provisions of the Declaration, including the sections relating to Brandywine' s maintenance responsibilities and the post office that the parties contemplated would be built in Concord Square.
Id. at ¶ 2.
On May 24, 2001, almost seven years after the Declaration and Memorandum were executed and almost four years after the deadline to construct the post office, Alpha sent to Brandywine a letter giving formal notice of its intent to terminate the easement Alpha's stated reasons for terminating the easement were that: (i) no post office had been constructed in Concord Square by June 16, 1997 and (ii) the "continuous safety issues, tenant complaints and increased maintenance and repair costs" associated with the easement constituted a "material burden" to Talleyville. Thereafter, in late September 2001, Alpha erected a barrier that blocked all use of the easement.
V. Compl. ¶ 8.
Id.
In response, Brandywine filed this action for a declaration that the easement was valid and in force, and for an injunction requiring Alpha to remove the barrier that currently blocks the right of way.
II. THE CONTENTIONS AND GOVERNING LAW
Alpha has moved for summary judgment under Court of Chancery Rule 56. To grant summary judgment, the Court must determine that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. The party opposing the motion has the burden of establishing that there are disputed issues of material fact appearing from the evidence of record. All inferences will be resolved in favor of the non-moving party, but those inferences must be drawn from evidence, not suppositions. Evidence may be presented in the form of affidavits based on personal knowledge, depositions, answers to interrogatories, or admissions on file. A verified pleading may be treated as an affidavit if it states that the facts recited therein are true to the party's own knowledge.
Williams v. Geier, 671 A.2d 1368, 1375 (Del. 1996).
Ch. CT. R. 56(e).
Liboff v. Allen, 1975 Del. Ch. LEXIS 255, at *14 (Del.Ch. Jan. 14, 1975).
Bruce E. M. v. Dorothea A. M., 455 A.2d 866, 869 (Del. 1983).
Alpha contends that it is entitled to summary judgment as a matter of law, because the Declaration empowered it to terminate the easement if a post office was not constructed in Concord Square by June 16, 1997, or if the easement were found to constitute a "material burden" to Talleyville. Alpha claims that both of these conditions were satisfied.
Brandywine responds that summary judgment would be inappropriate, because: (i) read together, the Declaration and Memorandum create an ambiguity that defeats a summary judgment resolution of whether Alpha validly terminated the easement; and (ii) in all events, any termination of the easement based on the non-construction of the post office is precluded, because after Alpha learned that no post office would be constructed, it waited over four years to raise that issue. Brandywine also argues that (iii) the current record fails to support Alpha's determination that the easement constituted a material burden; (iv) Alpha's determination was not made in good faith; (v) Alpha's notice of its termination of the easement was untimely; (vi) in any event, New Castle County's consent is required before any termination of the easement could become effective; and (vii) Alpha is liable to Brandywine and its tenants for damages caused by Alpha's wrongful termination of the easement. Alpha vigorously disputes all of these contentions,
Brandywine contends that if the termination of the easement is found to be wrongful, Alpha is liable to Brandywine, the tenants of the Concord Square shopping center, or both, for any damages or loss of income resulting from the blocking of the easement. Because the Court concludes that the predicate issue of liability cannot be determined without a trial, the damages issue is premature and will not be addressed in this Opinion.
These arguments boil down to three principal issues. The first is whether the easement was validly terminated as a matter of law, on the ground that the Declaration and Memorandum unambiguously required the construction of a post office in Concord Square that concedely was never built. The second issue is whether Alpha vividly terminated the easement on the basis that it constituted a material burden to Talleyville, and whether that determination was made in good faith. The third issue is whether the Declaration requires the parties to obtain New Castle County's prior consent as a precondition to terminate the easement. Those issues are next addressed.
III. ANALYSIS
A. Whether The Declaration And Memorandum Are Ambiguous And Defeat Summary Judgment
The Declaration states that, "In the event that a United States Post Office is not operational on the site at the proposed location within three (3) years from the date of execution of this [Declaration], then Alpha reserves the right, upon ninety (90) days written notice, to terminate [the easement]." Alpha relies upon that provision to establish its claim that the easement was validly terminated. Brand' twine contends that that same language, when read together with other language in the Memorandum, , renders ambiguous Alpha's claimed contractual right to terminate the easement for failure to construct a post office in Concord Square, and therefore defeats Alpha's summary judgment motion.
Declar. ¶ 6.
The Memorandum, which was excecuted the same day as the Declaration, recites as its purpose, to "focus and clarify [and] set forth the parties' understanding with regard to certain provisions of the [Declaration]..." The Memorandum goes on to state:
Mem. Preface.
With regard to the responsibility of [Brandywine] to maintain its portion of the Shared Area in a commercially reasonable fashion as set forth in Paragraph 3 of the [Declaration], it is understood by the parties that the maintenance obligation of [Brandywine] extends to all areas reasonably visible from the joint boundary line of the properties and specifically includes the obligation to maintain the area that was originally intended as a post office in an appropriate fashion to the extent that a building is not constructed at that site or the building that is constructed is substantially smaller than that originally contemplated.
Id. at ¶ 2.
Brandywine argues that that language renders the Declaration ambiguous for several reasons. The first is that the parties would have had no reason to "clarify their understanding" if their intent, as expressed in the Declaration, was unambiguous and clear.
Next, Brandywine contends that the second paragraph of the Memorandum creates an ambiguity. Brandywine relies upon the following language: "the area that was originally intended as a post office in an appropriate fashion to the extent that a building is not constructed at the site or the building that is constructed is substantially smaller than that originally contemplated." That language, Brandywine argues, can be read to have one of three quite different meanings, namely, that: "(i) a post office will not be built; [or that] (ii) no other building might be built on the space originally intended for the post office; [or that] (iii) if some building other than a post office is constructed at that site, the area it occupies might be smaller than the area that would have been occupied if the post office were built."
V. Compl. ¶ 14; Brandywine Ans. Br. at 10.
Alpha responds that the only intent and effect of the above-quoted Memorandum language is to clarify Brandywine's maintenance responsibilities (as set forth in Paragraph 3 of the Declaration) respecting the post office site, and the sole import of that language is that the post office, if built, might be reconfigured or located in a different area within Concord Square. That, Alpha urges, is the "only fair reading of the relevant language in the Memorandum, and it creates no ambiguity whatsoever. I agree.
V. Compl. ¶ 14; Alpha Reply Br. at 3.
Alpha Reply Br. at 3.
Having read the plain language of the two contemporaneous agreements, the Court concludes that Alpha's interpretation of the Memorandum is reasonable, but that Brandywine's is not. Brandywine construes the words "originally intended" to mean that the parties agreed that no post office would be built. That contortive interpretation would lead to a perverse result, because it presupposes that the parties would have executed two contradictory agreements at the same time — one requiring the construction of a post office and the other excusing it. But the Memorandum, fairly read, clarifies, rather than confuses or contradicts the Declaration. Indeed, Brandywine's argument cannot be reconciled with the Memorandum's second paragraph, which addresses Brandywine's maintenance obligations (as outlined in Paragraph 3 of the Declaration) with respect to the proposed site of a post office, which, if and when built, might be smaller than originally proposed.
Mem. ¶ 2 (emphasis added).
That conclusion does not dispose of the summary judgment issue, however, but for a quite different reason. After the deadline for building the post office had passed, Alpha waited four years before terminating the easement on that ground. That conduct, Brandywine argues, precludes Alpha from terminating the easement by reason of the doctrines of acquiescence, waiver, and estoppel.
Under the doctrine of acquiescence, a party may be precluded from asserting a claim where it has knowledge of an improper act by another, yet stands by without objection and allows the other party to act in a manner inconsistent with the claimant's property rights. Here, Alpha knew that the post office would not be built, yet Alpha waited several years before terminating the easement on that ground. That conduct warrants the inference that Alpha acquiesced in the continuation of the easement, despite its knowledge that no post office would be constructed. That inference is sufficient to defeat summary judgment on Alpha's claim that the easement was validly terminated on the basis that no post office had been constructed. Resolution of that issue must await a trial.
B. Whether The Unauthorized Traffic And Property Damage Constituted A "Material Burden"
Papaioanu v. The Comm'rs of Rehoboth, 186 A.2d 745, 749 (Del.Ch. 1962).
Brandywine also argues that Alpha's notice of termination of the easement was untimely, because Alpha waited over six years to terminate the easement after learning that a post office would not be built (and four years after the deadline date by which the post office bad to be built). If Alpha acquiesced in the non-construction of the post office, then the timely notice requirement becomes moot. If, however, Alpha is not precluded from exercising its termination rights, then Alpha's notice was timely because the letter would have been sent early enough to provide the requisite ninety-day written notice to Brandywine.
The second issue raised by Alpha's motion is whether the record supports Alpha's determination that, the easement constituted a "material burden" to the Talleyville Center. Brandywine contends that summary judgment must be denied, because the present record does not support that determination, and also because there is evidence that Alpha made its determination in bad faith. I find Brandywine's arguments to be without merit.
1. Is There Sufficient Evidence Of A Material Burden?
The Declaration states that, "if at any time Alpha determines that the easement granted to [Brandywine] is a material burden to [Talleyville] ... then Alpha shall have the right ... to terminate [the easement]. Such a determination if made by Alpha, shall be absolute, binding and not subject to challenge for any reason whatsoever." The provision then recites examples (which are deemed not exclusive) of scenarios that might constitute a "material burden."
Decl. ¶ 6.
Id.
Brandywine contends that "materiality" is generally a question of fact that cannot or should not be decided as a summary judgment matter. But Brandywine cites no legal authority which requires that a trial be held in every case where materiality is an issue.
Branson v. Exide Elecs. Corp., 1994 Del. LEXIS 129, at *7..*8 (Del. April 25, 1994) (stating that while issues of materiality may not always be disposed of on summary judgment, the Court can make such a factual determination on the basis of a developed record); Wells Fargo Co. v. First Interstate Bancorp., 1996 Del. Ch. LEXIS 3, at *29.. *30 (Del.Ch. Jan. 18, 1996) (citing Branson); Kelly v. McKesson HBOC, Inc., 2002 Del. Super. LEXIS 39, at *49 (Del.Super. Jan. 17, 2002) (citing Branson).
Brandywine next argues that Alpha has adduced no evidence to support its conclusion that the easement constituted a material burden. I disagree. Alpha's verified answer and supporting affidavit constitutes prima facie evidence of a material burden. That evidence shows that heavy delivery trucks, tractor trailers, and high speed traffic, all used the easement to cross over into Concord Square. Those vehicles posed safety concerns to Talleyville's tenants and their customers, caused damage to Talleyville's parking lot, and resulted in tenant dissatisfaction. It is Brandywine that has adduced no evidence to controvert Alpha's showing. Thus, the record establishes that Alpha had a factual basis to determine that the easement constituted a material burden upon the Talleyville Center.
V. Answer ¶ 11, 25; Stella Aff. ¶ 8, 9.
Brandywine does not deny the particulars cited in Alpha's Verified Answer or Request for Admissions and Interrogatory to support Alpha's claim that a material burden existed, except for one item, and in any event, Brandywine has proffered no evidence that contradicts Alpha's evidence.
2. Was The Determination Made In Good Faith?
Brandywine also argues that Alpha did not make that determination in good faith. Although the Declaration grants Alpha complete discretion to determine whether a material burden exists, Brandywine contends that Alpha must still make that determination in good faith. That did not happen, Brandywine says, because Alpha's only motive for making its "material burden" determination was to prevent a tenant from leaving Talleyville to move to the Concord Square shopping center.
V. Compl.¶ 35.
All contracts contain an implied covenant of good faith, and from that implied covenant there flows the principle that "if one party is given discretion in determining whether [a] condition in fact occurred[,] that party must use good faith in making that determination." Alpha concedes its duty to make the "material burden" in good faith, but argues that that it fully observed that duty. Again, I agree.
Wilgus v. Salt Pond Inv. Co., 498 A.2d 151, 159 (Del.Ch. 1985).
Gilbert v. El Paso Co., 490 A.2d 1050, 1055 (Del.Ch. 1984).
Brandywine's argument that Alpha's sole motivation was to prevent the loss of a "significant tenant," and not to remedy misuse of the easements and customer complaints, is a conclusory statement without support in the record. Alpha, on the other hand; has adduced prima facie evidence that it determined, in good faith, that a material burden existed. Because that evidence is uncontroverted, and because Brandywine has adduced no evidence to support its "bad faith" argument, Alpha is entitled to summary judgment on this claim.
Alpha's General Manager, Robert Stella ("Stella"), referred to a possible loss of tenants who might consider relocating due to safety concerns posed by the improper use of the easement. Stella Aff. ¶ 10.
Alpha claims that it sought to work with Brandywine to erect a barrier that would eliminate the offending traffic and preserve the easement. Brandywine does not deny this claim, but takes the position that it does not have sufficient information to admit or deny it. V. Answer ¶ 11; Req. for Admis. and Interrog. #7. That agnostic position does not create a triable fact issue. Moreover, Stella testified that he received complaints from Talleyville tenants with respect to the delivery trucks and high-speed traffic that used the easement, posed serious safety concerns, and caused damage to the Talleyville parking lot. Stella Aff. ¶ 8. That evidence is not controverted either.
C. Whether The Consent of New Castle County Is Needed For Alpha To Terminate The Easement
The third and final issue raised by Alpha's motion is whether the Declaration requires Alpha to obtain New Castle County's prior consent in order to terminate the easement. Paragraph 8 of the Declaration states that "[e]xcept as provided in paragraph 4 above, this Declaration may not be amended, modified or rescinded without the prior written consent of New Castle County Council." Brandywine contends that Paragraph 8, on its face, requires Alpha to obtain the County's prior consent, Alpha argues the contrary. It contends that Paragraph 8 contains an obvious typographical error that, if corrected, would clearly show that the County's prior consent is not required. The typographical error, Alpha claims, prevented the accurate expression of the parties' true intent, which is that the "except" clause of Paragraph 8 was meant to refer to Paragraph 6 — and not Paragraph 4 — of the Declaration.
V. Compl. ¶ ¶ 29, 30.
Stella Aff. ¶ 11.
In support of its position, Alpha argues that (i) Paragraph 6 is the only provision of the Declaration that addresses "recission" of the Declaration, and (ii) Paragraph 6 does not make the right to recission subject to County approval. Therefore, Alpha contends, it must be concluded that Paragraph 8 of the Declaration was intended to carve out Paragraph 6 from the County approval requirement — not Paragraph 4, which deals with mechanics' liens.
Paragraph 4, in full text, states that:
Any rights or obligations of either party to perform repairs or other work on the property of the other shall not be construed to be a consent by the latter to subject its property to a mechanic's lien or similar claim by any person supplying labor or materials for such work.
Alpha's "typographical error" argument may ultimately be shown to have merit, but for the Court to accept that argument on the present record would be tantamount to reforming the Declaration. The remedy of reformation will be granted on a showing of (inter alia) mutual mistake with respect to a material term in the contract. The party seeking reformation, however, must show by clear and convincing evidence that the parties' actual intent was not accurately reflected in their written agreement. The "clear and convincing" standard requires evidence that would lead a trier of fact to "an abiding conviction that the truth of [the] factual convictions are highly probable." That showing has not been made here.
Amstel Assocs. v. Brinsfield-Cavall Assocs., 2002 Del. Ch. LEXIS 54, * 15 n. 12 (Del.Ch. May 9, 2002).
Given the exacting standard for granting reformation — which is the remedy that Alpha must earn in order for it to prevail — the "typographical error" issue cannot be resolved at this stage. Testimony will be required, because it is not indisputably self-evident from the Declaration that its reference (in Paragraph 8) to Paragraph 4 is erroneous. Because its resolution must await a trial, summary judgment on the "County approval" issue will be denied.
IV. CONCLUSION
Counsel shall confer and submit an agreed form of order implementing the rulings in this Opinion.